i'm becky quick along with joe kernen and andrew ross sorkin. if you're wondering whether all the talk about the fiscal cliff really matters, just take a look at the chart of the dow or the s&p. stocks have been falling pretty rapidly as investor anxiety rises about what's going on in washington. joe mentioned the major averages. traditionally that's a sign that more selling could be ahead and sure enough, take a look at the futures this morning. not looking to rebound today. they are below fair value once again. among our newsmakers ready to talk, we have ralph schlosstein and also cloutiee says uncertainty is keeping businesses from asking him for loans. and at #:00, we'll turn to two former governor, judd gregg and ed rendell both understand the dire consequences of doing nothing to overt the fiscal

cliff and what would happen if we went over that fiscal cliff. first before we get to all of that, andrew has this morning's top stories. good morning. we have a big day ahead of us. and the fiscal cliff conversation begins today. president obama will be making a statement on the economy. he'll speak from the east room of the white house at 1:05 eastern time. you can of course catch all of it right here on cnbc. john boehner is also scheduled to hold a you news conference today, as well. st. louis fed president james bullard is saying the u.s. economy is strengthening. but he's cautioning that leaders must tackle the looming fiscal cliff. a conversation we can't get away from. speaking in missouri yesterday, bullard also says he doubts the central bank will extend a bond maturity extension program that expires at the end of the year. bullard is not currently a voting member, but he will ebb in 2013. and china's national congress continues with new leaders for the communist party set to be named later this morning. today a rising star said the

party is moving towards requiring officials to their their assets. so an interesting piece in the chinese business press this morning. >> we have been talking about the fiscal cliff and -- >> we have? >> and yesterday somebody tweeted a new drinking game. every time they say fiscal cliff, you drink. they're right, but it's absolutely what matters. >> look at the stock market. did you see today what it's going to do? >> down again. >> it was down over 100 yesterday and it couldn't hold up. supposed to be up 70 when were watching yesterday morning. indicated down again. and it has a way on friday of if it starts down -- we'll see what p happens. but my idea of rising above, i'm almost at a point where i feel like rising above what we're going to hear today and what we're going to hear near term. because i already see david plouffe in the journal and what the president will say today and we'll have to go through this again. it will be like we're back where we were for the last year and

that is this idea that you're going to somehow before this happens get republicans to agree to extend the bush tax cuts on everybody except for those above 250. that's not going to happen in the house. >> you need to have something where everybody -- >> i'm on record, this is my rise above. this is what i want. i want a year extension of everything and do simpson bowles in the meantime, put up some -- even with andrew, we agree now, higher effective tax rates. but do is in a simpson-bowles way. but what we saw this week very clearly, the far left is ready to go off the fiscal cliff because finally they'll get 39 -- >> so is the right. >> that's right. so is the right. the right is willing -- >> they think it's austerity. >> obama used to get mileage by backing the house into the corner of being obstructionist. they don't care anymore. they're at 8% approval rating.

>> i think there are honestly a group of people in the house who think if you go over the fiscal cliff, it's the best thing for the economy. they think if you take your medicine and you take the punishment thousand. >> people on the left feel the same way because they'll at least get the high end back to 39.6. they want to reset everything to pre-bush tax cut and then try to leave it high. breaks to the lower people. so both sides are still this far apart. >> what i don't understand is not coming back to the table. i hope we hear something from the president later today. i've seen some of the early stuff from plouffe and things. what i'd like to hear is something more akin to what we heard, lock everybody in a room and don't head them out. >> plouffe and axelrod are smart. there are 100 guys in the house that you could say are obstructionist, but nobody will remember any of their name if we

go in to recession. but you're going to remember president obama if we go into another recession. so it doesn't help him to do that and to -- but his base is still saying no. >> i'm going to complicate it. i talked to somebody yesterday who is close to paul ryan. he's one of those 100. if paul ryan wants to run for president in 2016 -- >> they're talking about jeb bush and chris christie and marco rubio. >> but he has a big future in politics in the republican party. >> i haven't seen paul ryan in four or five months. >> anyway, all i'm suggesting is -- >> has he been around? i thought he left the country. >> they will remember. >> i won't take cheap shots. >> you think he's in the witness protection program? >> i'm not going to take a cheap shot. he has not come on on the show and he was on a lot. so i won't take a cheap shot. he hasn't been training for the marathon. that was going to be my cheap shot that i wasn't going to

take, but he has not been on this show until though he used to come on all the time. >> was it a cheap shot? >> yeah. >> probably was. anyway, of course he's one of the 100. there's a the lot of guys in there that -- i know plouffe says it was a clear vote by americans that they want taxes raised. there are a lot of thins that went into that election. and i think the exit polls was at like 40% said that. so getting 40% of population to agree that they want to raise the taxes on somebody else is not that big a deal. it's not that hard to get people to raise taxes on the other guy. >> but boehner seems to be willing to give a little bit more. i wonder whether he gives and then can't really -- >> kerry says we won't be pushed around, but you can't do it without the house. >> elections do have consequences. you said that yourself. and you wonder if there will be something where you can bring a compromise. my guess is that you won't be

able to start back exactly where you were before. you need to find some way to come about and boehner has suggested there's a way you can do it by changing the tax code, by getting rid of some of the loopholes and deductions. and again, higher effective tax rates for lower marginal tax rates. >> i am rising above, but i'm with these guys that there are guys that think, wait a second, what are they doing in europe? they're raising taxes and cutting spending. what happens if you go off the fiscal cliff? you raise taxes and you cut spending. so there's plenty of people who think we should take the medicine on the right i'm talking we should take our medicine right now and flush the toilet and threat happen and then we'll start from a different level. >> i don't want to see an extension of a year, though. >> why? >> because i think that's too late to deal with it. we've kicked the can down the road continually. >> people say it takes four years to get tax reform. >> you need to have some patch

that requires change and it requires people to put in before you get to that. >> then do the loopholes. >> i think you have to do something that raises revenue. and cuts spending. >> the problem is i think plouffe and obama -- i already know the 100 guys in the house, i'm telling you, it will be who blinks first. which is not good because s&p is already warning it will be -- you do the staring contest. as we mentioneds, futures are below fair value once again. the dow futures are down by another 24 points. if you take you a look at what's happening in europe, you're going to see that at least at this point there are some modest declines there, as well. in asia overnight, you'll see as well that things closed lower there. not massive losses, but the kospi and korea was down by

1.25%. hang seng had more modest decline. down by 182 points, but that's less than 1%. oil prices today, down about 38 cents to $84.71. and the ten year note again the yield we've been watching pretty closely just to see where things go, 1.644%. the dollar right now, down against the yen. euro we've seen it hanging here for most of this week. >> worse and worse for the euro. >> right now gold is up by $4.30. >> we're going down in the blaze of glory and they are. >> but the dollar is getting stronger. why is the dollar getting stronger? >> that part makes a little less sense. >> there were concerns about europe that kicked off some of the selling.

>> gold went up on qe perpetual. bernanke at least staying unlg t until the end of his term. disney reported fourth quarter results in line with expectations, but revenue fell just short of consensus. results were helped by visitors to the theme parks and revenue gains at espn and bob iger says the company is entering a transition year after smin veoa investments. in deal news, priceline is buying kayak. >> this is my favorite travel website. >> that's weird because i can't believe there's that many people that want to go kayaking. >> it's for airplanes, hotels. >> why is it called kayak? >> i don't know. they made up that name years ago. >> so you you don't -- >> i don't leave that you can

rent a kayak on kayak. >> you can't even rent a kayak, but it's called kayak. >> it is severally the best -- >> what what have you used it for? >> to go where? >> hotel, airplane, anything. >> so it gets you a cheap something? >> yeah. and it has -- the features are better. it's easier to use. you can tell it exactly what times you need to hand, you need to drive -- >> now it will be part of priceline. >> the saddest part about a deal like this is for $1.8 billion, you have to imagine priceline could have bought this company years ago for $100 million forks $500 million, for a billion dollars. just went public. >> i don't think priceline offered kayak tours before, so they need to diversify probably. can't just stick with -- right? >> yes. >> the transaction is worth $1.8 billion. kayak allows users to compare hundreds of travel sites.

>> yes, you compare everything. >> when looking for flights, hotels. >> rental cars. >> look what's next for you. >> my favorite. here it comes. in the same category as kayak. shares of zip car jumping after the bell. take a look at the stock there. company posting better than expected earnings and revenue. the car sharing company says it has cut radio ad spending and instead is ramping up a referral program and attack soesh immedia social media. game technology also reporting better fourth quarter earnings on sales of slot machines. let's get back to the broader markets. joining us live from new york is maury harris, chief u.s. economist at ubs investment research and from richmond, virginia, alan gail from ridge worth capital management. . welcome to both of you.

maybe we should start having a bell ding every time we talk about the fiscal cliff. we were talking about it this morning and trying to figure out what it means. the cbo came out with new projections. they do talk about how this could push the jump in the jobless rate to 9.1% by the end of 2013, but they say over the longer term, you will see the unemployment rate fall and the economy would return after some time. they're talking about a long time, though. i think it takes until about 2020 before you see the rate back down at 5.5%. how big of a deal is this, what happens next year and beyond if we do go over the fiscal cliff? >> first of all, i think it's a public service that the cbo is warning what would be these likely dire consequences if in fact we go over the fiscal cise there is that kind of warning, politicians post-election should realize that if they don't did anything about this, that they're going to be responsible for the next recession.

and i think that's a pretty powerful motivation to get together and avoid it. but it's hard to argue with the cbo's number that if these politicians don't get it together and find a way around this fiscal cliff that could happen. >> is that an argument for doing nothing and kicking the can down the road? >> avoiding the fiscal cliff initially means postponing the spending cuts that were scheduled for the start of next year and postponing the tax mcs from the expiration of the bush tax cuts. but then next year in the first half of the year, they need to sit down and work out a longer term deficit reduction package. it's probably too much to ask of them to have a grand bargain before the end of the year, but they can postpone this cliff and signal some commitment toward a long term deficit reduction deal. >> but how do we did that? that's what this fiscal cliff was all about, it was about postponing things so we could

wait until the economy looked better. yesterday an economist we spoke with said it's not going to look better for the next five years. and we can't wait five years before we actually try to tackle the deficit. >> well, no. they'll have a plan that starts to go into effect later this year, i believe, but that i personally think it will be a plan that is only gradually first in terms of deficit reduction and will be back loaded. and with the economy, you know, just doing okay but certainly far from great, about the best you can expect of them realistically is to have more of a back loaded plan. this is in line with what bernanke has been suggesting, that you don't go for the fiscal restraint right away, you postpone it, and then you get to work on on it in a credible way, but inevitably it will be back loaded. >> the market's reaction this week, alan, is it because the market is coming around to the

idea that it's more and more likely that we could gooff the physic over the fiscal cliff? >> it's a combination of things. the third quarter earnings season, we discovered that revenues remain challenged. and we're getting a lot of guidance from ceos that revenues will be challenged going into 2013. and then we come up and the election is over, i'm grateful that they are. but we've got this fiscal cliff now coming that up will require some action. a lot of the -- we believe that we will come up with some kind of deal. i doen it will be some kind of kicking the cap don down the ro. but one element that does give me some concern is the 2% fica. as near as our analysts can tell, there is no energy to continue that going into next year. >> the payroll tax cut. >> the payroll tax cut.

and so the concern is as we go into the holiday shopping season or just coming out of of the holiday shopping season, the average worker is going to find their take home pay go done by 2%. so the defense sequestration is likely to be dealt with and in our opinion, we'll have some kind of extension of the bush tax cuts in our opinion. but as near as we can tell, that will still be a hit to the average consumer as we go into the end of this year and the beginning of next. >> you said that your strategy in terms of allocation is that you do believe some sort of agreement will be met. does that mean that you are heavily weighted towards stocks because you think the market will rally when and if there is a deal? >> no. i trimmed my overweight position in equities in the allocation strategies earlier this year because i felt that the economy was decelerating, that had to be reflected in corporate earning. and then ultimately in earnings estimates. so the fiscal cliff is part of

the lee key areas we've been watching here is when we can recommit money to equities. so if we do step off the fiscal cliff, we could see bonds rally even further in here even though they're at unsustainably low levels. so we remain cautious, but we do think we'll get through this and i think 2013 will be a better environment for equity. but right now earnings estimates in our opinion are way too high and have to come down. >> so both you guys don't think that we're going to before january 1st get a deal where the bush tax cuts are extended just for those at 12250 or below? >> no. to have any kind of deal with the republicans, obama has to compromise to some degree. >> that's why i want to rise above this and just skip talking about it, but he'll come out today at 1:00 and we'll hear folks at the top will have to pay more. we're going to hear that again.

plouffe is quote thed as saying that. can we just cut the bs? they're not going to do it. >> that you will krugman this morning, how far should the president go? my answer is not far at all. obama should hang tough declaring himself willing to hold ground even at the cost of letting his opponents and foot down on a still shaky economy and this is definitely no time to negotiate a grand bargain on the budget that snatches defeat from the jaws of victory p. >> that's what we head from podesta yesterday, too. hit up drudge. there's a picture of mitch that says up to the left, no -- they're not going to do it. >> boehner was more conciliatory than anybody i've heard. he was okay with the idea of coming up with higher revenue by closing loopholes. at least that's a bridge to a compromise. everybody else who has talkeds

has said forget it. >> but that's simpson-bowles. we'll raise higher effective rates, but -- >> right. but it's also something that he'll have to deal with his base bay saying, yes, you can raise effective -- >> do you know how many times we've heard president obama say about wealthy people can pay a little more and that 250 or above? but we've heard it for two years. it will be today 1:00 p.m. >> hard to turn around and say forget it. >> he did the extension when we had to do it last it time. he's not running for re-election. he doesn't need to satisfy paul krugman. you can never satisfy him. so why even try? let's just do it. people say he has to rise above. >> and you're back in the same problem with the debt ceiling. >> that comes next. >> and you don't have the house. so two years in now, you might have the house. in fact if these guys -- if you really think that they're going to get penalized for this by public opinion and if the president wants to paint them as

obstructionist, then two years from now, you can have a democratic house and then you might be able to do it. but until then -- i want to rise above and not talk about it anymore. >> the more we talk about this, the more it is concerning. but marury and alan, what do yo think the odds are that we will find an answer? >> i think that the the odds of stepping over the cliff are somewhere between 25% and 35% this is higher than we would like. in-o i think one of the reasons why the discussions will go longer and they'll be last minute is that i think boehner does need to keep his base in order. he does have to stand for re-election as speaker of the house. and so he has less wiggle room i think than harry reid does. >> at least until late november

whenever they actually caucus? >> right. >> and the president has wig i will wiggle room the size of the west coast to east coast. >> but he also feels he just won a mandate. he did come away with a victory if you look at the electoral college. >> but he knows full well it wasn't about this issue. >> yes, this was not the only thing out there, but it was huge part of his campaign. >> do you know who else had a huge mandate and said i have political capital and i'm going to spend? george bush said that about social security in 2004. didn't even get to the planning stages. >> the president had this with obamacare back in 2010. he lost the midterms. >> which means -- see, i've already risen above, but i don't have a lot of confidence that -- although at this point, his wiggle room is huge.

he just says fine, let's go a year and work on simpson bowles. but he's never liked simpson bowles. >> maury, what do you think? >> two quick points. first of all, you have to read between the lines. this week there will be a the lot of pre-negotiation posturing going on. and people will reiterate their positions. but they can move from that. second point, i think what we can hope for is that we go back to business as usual in washington. business as usual in washington is saying that you address a problem having a deal but having it back loaded. you can call it kicking the condition down tcan down the road, but that's a step in the right direction because they couldn't even agree to kick the can down the road. so they haven't been able to agree on hardly anything. so just being able to agree on something gets back to the good old days where they at least cut a deal and partially address a problem.

>> gentlemen, thank you both for joining us this morning. and we will hope for the best. coming up, westgate. ross westgate. sky fall has already brought in over 100 mem i don't kn o00 mil. as opens here, he brings us -- he went to like spy cam or something. was he the teach or the student? >> there he is. if lawmakers cannot agree he on a plan to avoid the fiscal cliff, funding for school improvement grants would be cut by $44 million. negatively affecting 67,000 students across the nation. how? with scottrader streaming quotes, any way you want. fully customize it for your trading process -- from thought to trade, on every screen. and all in real time. which makes it just like having your own trading floor,

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. in quake sports new, thursday night nfl game, andrew luck ran for two touchdowns. in quake sports new, thursday night nfl game, andrew luck ran for two touchdowns. indianapolis beat jacksonville 27-10. colts improved to 6-3 and the jags, maybe they weren't that hard to beat. they dipped to 1-8 and they have lost six straight games. >> the 22 bond movie so is far have grossed some $5 billion at the worldwide box office. thousand we have number 23 and

ross westgate is standing by in london. ross, you are our very own international man of mystery. anytime we have something like this, we have to turn to you. you've done some research on this count. >> yeah. the bond movies biggest open worldwide. before the debut in north america. and it coincides with the launch of a new sort of spy training weekend. a luxury experience called secret me. but the key thing about it is when you go on this course, you're being taught by ex-intelligence officials, special forces guys, people that have worked as surveillance for the british government. . we have some pictures while i talk. you but the amazing thing is that you are -- this was a bit of the package that you can see.

they teach you things like shooting. you get flown there in a helicopter. misst mi pistol training, unarmed combat. how to play poker properly. surveillance training if you want to track people around in secret. you also get taught the art of a duk seduction which is also very use, as well. making cocktails. and misstal marksmanship. >> so handguns, too? >> yeah. >> that's live ammo?isstal mark. >> so handguns, too? >> yeah. >> that's live ammo?opiisstal m. >> so handguns, too? >> yeah. >> that's live ammo?sisstal mar. >> so handguns, too? >> yeah. >> that's live ammo?isstal mark. >> so handguns, too? >> yeah. >> that's live ammo?sstal marks. >> so handguns, too? >> yeah. >> that's live ammo?isstal mark. >> so handguns, too? >> yeah. >> that's live ammo?isstal mark. >> so handguns, too? >> yeah. >> that's live ammo?pisstal mar. >> so handguns, too? >> yeah. >> that's live ammo?isstal mark. >> so handguns, too? >> yeah. sstal mas live ammo?tisstal mara tal maal marl mark >> it is live, but not the proper ammo. sort of like practice pellets. are you firing the guns. >> do you have all ten toes left? >> i've got everything left. >> if that were me and i was

like pulling it out of -- who knows? andrew, right? we could be -- i can't believe it's live ammo. not that you're clumsy, but that's scary. the local place is cleared out hopefully. >> no, you're flown to a bigger state, about 2,000 acres. and the whole place is just for the group that's there for the weekend. >> what about this art of seduction? what did they teach you? >> he taught them, damn it. >> well, no, it's more about recognizing honey traps. you think about corporate espionage. it's people trying to get information from you that you're not supposed to tell. so sort of be aware of how people are asking you questions and what their angle might be. and also hostage taking. quite a lot of celebrities and ceos go on this and they learn about hostage taking. >> do you have a banana in your hand? >> is that a gun? did q give you that and can that

actually fire, the banana you're holding? why are you holding it? >> this is the latest technology from mi-6. and i can't say too much more about it because i'm restricted by the official secrets act. >> but you don't carry that in your pocket, do you? >> you you can carry it anyway you you like. >> is that a gun in your pocket or a banana? anyway -- >> how much does being bond cost? >> the weekend is 10,000 pounds, so $15,000. so it's priced off if you went a weekend of grouse shooting, it's priced off of that level. and that's the first stage out of lee. you can go a second is a week this europe that's about 50,000 pounds. $75,000. and then the third stage which i haven't done yet would be about ten days anywhere in the world because you can do an awful lot

more things in certain countries. >> how often do they run this? >> it's once a month. >> pretty cool. >> and the uk really doesn't need to be a leading global power anymore for you to have like a secret service, it's okay to just keep pretending that you're a big factor in the global -- that's kind of cool isn't it that you still even need secret agents. do you you need secret agents? >> well, apparently the amazing thing is you get to talk to the guys that are still doing sort of surveillance for the government. although they don't work full-time. apparently london is sort of surveillance capital of the world. if you think about all the different governments that come here, the international businesses that are here, and there's a lot of corporate espionage particularly states trying to steal western corporate secrets. so long dodon is a huge center. >> that is true. that's where you will see every

other country represented there. i don't know. has it taken over from new york? in certain ways it has. >> international financial. >> closer to the middle east, closer to dubai, china, everything else. well, that was cool. very cool. >> and i don't think you needed any help in terms of the charm, the polish, the playing poker, the making martinis. you knew all those things already. the seduction. >> i'm going to come over and now i know thousand make a vest. >> about a in an that was breakfast. >> it was his gun when he came in about that. >> oh, but it doesn't really work. >> it might. >> someone handed that to me. >> ross westgate or mr. bond, shall we say, thank you very much. we'll see you very soon. coming up, we have shares of disney trading lower. we'll go beyond the quarterly

results with a top rated analyst who covers that company. first, though, as we head to a break, here's disney's ceo bob iger. >> overall we feel good about the year ahead. not just in terms of our ability to deliver gults on the bottom line, but about all of the different developments that we've been working on that are more long term focused in terms of investment. flight stats reports that more than 20,000 flights were canceled due to sandy. as a result, analysts projecting the storm could knock upwards of $200 million off of airlines bottom lines and that could mean a further dip for the global

airline industry as profits are already expected to be down more than 50% year over year. that's according to the international air transport association. for more on business travel new, head to to roadwarrior.cnbc.com. . up. a short word that's a tall order. up your game. up the ante. and if you stumble, you get back up. up isn't easy, and we ought to know. we're in the business of up. everyday delta flies a quarter of million people while investing billions improving everything from booking to baggage claim. we're raising the bar on flying and tomorrow we will up it yet again. who have used androgel 1%, there's big news. presenting androgel 1.62%. both are used to treat men with low testosterone. androgel 1.62%

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yes mom, i'll place a long call to you tomorrow. i promise. open an account today and get a free 13-month eibd™ subscription when you call 1-888-280-0154 now. optionsxpress by charles schwab. disney earnings matching the street revenues falling a bit short. anthony, i forgot about cruise ships. you have to think about so many things it is to analyze this and this was always the wrap on disney. for anybody like bob iger who has done a great job, but there are so many disparate parts of the business. how many parts do you separate the business into and how many

are firing on all cylinders and how many aren't? >> the theme of the quarter, joe, is that for the december quarter, there are a number of items that are leading us as analysts to reduce our estimate for the quarter. as you mentioned, some of those are timing related such as the timing of the holidays and at the parks and also title specific comparison ons at the studio. but some are trends that are underlying and more recur throughout the year. one of those is margins at the parks. soo they're investing in new initiatives in orlando and shanghai who are good in theory longer term, but it will put a dampening effect on operating mar begins this year. the second thing is advertising pacings at espn. it may be because of competitive forces, you covered the thnfl network game. but espna.s are down for the quarter. and then the third things are the costs against espn.

so the cfo pointed out there is an incremental $170 million of sports rights fees costs this the december quarter that will hit. and some of that's timing related because the nba is the pac back but some is just higher sports rights fees from college and the nfl. so it's tough to try to figure out which of these are timing and which are trending so to speak. but that's kind of my summary on it. >> i understand what you're saying. in this world, live sporting events, you don't dvr them, you can't fast forward through the commercials. it's going to be what people want to watch. and yet everybody's getting into this business. more and more sports channels trying to challenge espn which will bid up the price college football can get. so it will get squeezed. >> and the nfl network this year has more thursday night games. you can argue they have a better draw on the match-ups. better distribution. so a lot of folks in cable

satellite, their providers didn't carry network last year. so it's taking a little mine share. and just a small impact this year, but notre dame fgt has been great on on saturdays. and so maybe that's taking a little bit before so there are little things on the margin and you've got a lot of other companies, nbc sports and many others of value sports. >> if nbc could have made that guy at pittsburgh miss that field goal, they would have done it. the nbc executive, yes, he missed it! i mean, it's really funny the way that works. all right. so are you buying it? >> so i think that 15 times earnings for disney is appropriate. it's a class name in entertainment. but if you do 15 times, you're at $52. so if the stock's at $49, it's a

fair value. i think your risk-reward is probably even on good times. >> i wish we had more time because we can't talk about the latest stuff, but thanks, anthony. and may the force be with you. >> have a good day. when we come back, we'll talk about stocks being battered by a rough two day selloff after the election. we've been watching the futures and they are below fair value once again. we'll head to the futures pits of chicago and ask trader there is if the trend is likely to continue. ♪

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welcome back to "squawk

box." futures are pointing to a lower open ang us, ira harris. good morning. >> good morning. how are you? >> i'm good. but i am sad. it's been a bad couple days. the president will be speaking later. boehner will be speaking later. i don't know if that portendses good things. i imagine it's probably pbad things. >> we're all going to watch because i know a lot of people who voted for obama, not that they thought that he was necessarily such a great choice, but believing that he's going to govern from the middle. so i like others will be watching as to who -- and i think the markets will be more importantly watching, who he's going to appoint to reflect that. now, if he truly will govern from the middle, i think we should see somebody like erskine bowles be secretary of the treasurer.

>> if he. >> shon: says the same tune that he's singing before, the markets do what? >> we'll sell off, but it will be what will happen in the last half an hour of the trade. boehner's speech ways very conciliatory and it looked like there was room for movement. >> is it like people that i know need erectile dysfunction medication or are you one of the people that thought -- voted for him because you thought he would come from the middle or these are other people? >> no, these are a lot of other people. >> have any of them said where they get the indication that he'll do that? are they just figuring because it's hea second term? >> when 6 billion is spent nags l nationally on elections, that's not charity. people want something. so when somebody wins, there's a

winner and loser here. when i walk up on wednesday morning, i go who is the winner. and if you look, and this is an amazing thing, that's why the wisconsin vote and i'm wearing my red and white wisconsin today, but who is the winner? the public sector unions were the winner. people will realize there's a shift of money. why is there more money being asked for? because the shift of money to the public sector unions from every other sector of this economy has been dra a mamatidr. and this is what the battle is about. you got to look at the money spent and who is the winner and who is the loser. >> we'll see whether there is any middle road. i don't expect to hear anything today. >> ira harris, thank you so much. when we come back, the ceo of a regional bank warns that he is already seeing effects from the looming fiscal cliff. namely fewer loans and fewer requestses for loans, as well. we'll have the details. ffrs from investing for the first time...

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the looming fiscal cliff, ding, is causing businesses to change how they plan for the future. rusty klichet is ceo of mid south bancorps. we talk about uncertainty we have a biggie here, don't we, rusty? before the election we talked

about the fiscal cliff but now the next big thing coming is new year's, january 1st and it will hit. >> it will definitely hit and the nervousness among my customers are we going to be able to form a government in washington? they're concerned about the fiscal cliff and what the government will look like. right now it looks like unless we get some working together of the government, we're not going to be able to be former government, we'll be where we were the last two years with the two sides in fox holes shooting at each other and for business uncertainty is the worst thing they can have, not knowing what are the rules of obama care, what are the tax rules of the fiscal cliff and of course the industry, with he loan a lot of money to the oil and gas industry, what is president obama going to do with the epa and what are going to be the rules on the oil and gas industry. so this uncertainty is really making business people extremely nervous and not encouraging them to come to the bank and borrow money at this point.

>> rusty, i think that the president has a base, but the reason you need a base is to get reelected. once you don't need that -- he has the ability to tack to the center right now and then could end up things get fixed pretty well and the economy gets fixed pretty well and oil and gas gets fixed and he ends up being a good two-term president. maybe he does that. do you see any indications of that? >> you know, i don't now. i'll be like y'all, waiting carefully for his speech at 1:00 today. he has a base and so does the republican congress. >> he doesn't -- he needed it to get reelected. now he needs to be, he needs a strong economy. he needs a legacy, doesn't he, or is it really still about transforming society? >> well, that's what i think my customers are really wondering about exactly where we're standing here because if we end up in the situation where he

just wants to change the country, then i think business people are really going to sit back and say well what do we do, how do we do it? they are facing a tremendous amount of questions and they've got about 60 days to get answers to determine what are they going to do, exactly where are they going to spend money, who are they going to hire and what are they going to do. i'm very concerned personally we're not going to get the answers we want and that's critical to the country and this does fall on the president's back to be the leader of the company -- country in the form of government here. >> he needs to really get it -- doesn't like getting down in the trenches i don't think with republicans. i don't think he likes them very much and i don't know, there's no love loss on either side so i don't know whether we actually, whether we see that. rusty, here is the one point, over in europe we say you got to do whatever you got to do, cut spending and if you need more money to make ends meet, you got to raise your taxes. that's all the fiscal cliff is, raaxes and cutting spending.

the europeans could look over at us and say hey this is your austerity. this isn't bad. do it. >> absolutely. you know, we have to cut spending, not only at the federal level but at the state level, at the county level, at the city level and in the banking business we're extremely concerned about municipals right now. they also have this problem, and i think your previous comments about, you know, the public unions taking on private enterprise, i think that's going to be a big fight here in the coming months that are coming about and all i can tell you is that main street america today is getting ready to lock up and if they lock up, we're going to go back into a recession. >> thanks, rusty. we appreciate your time today. we have to run. coming up, ralph schlosstein on the fiscal cliff and a lot more after this. maybe new buildings? what about updated equipment?

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rising above and putting money matters first. evercorps partners ceo ralph schlosstein on what needs to happen as president obama outlines the plan to avoid falling off the fiscal cliff. it's a cnbc exclusive, dinakar singh on his latest investment strategy you won't want to miss. a "squawk" ceo call, united airlines chief jeff smisek tells us what he's seeing ahead for the airline industry as the second hour of "squawk box" begins right now. ♪ people keep on learning good morning, welcome to "squawk box" on cnbc, i'm andrew ross sorkin along with becky quick and joe kernen. after the worst two-day stretch

in the markets for over a year the futures, take a look, here it is ahead of some interesting news, we have a lot of stuff going on today but let's get that futures chart up there on the screen, if we could, as we're speaking. dow looks like it would be off another 28 points. nasdaq looking slightly higher up 2 points and s&p 500 off by 2.5 points. let's get you some of the morning headlines. president obama set to address the issues that have been spooking the markets all week. the fiscal cliff he'll be making an appearance at the white house at 1:00 p.m. eastern time which of course you will see live right here on cnbc. best buy founder richard celts may not buy the company until december and the price may be below the initial $8 billion bid, according to sources quoted by reuters. and as we talked about in the last hour a travel industry deal will see priceline.com buying kayak software for $40 a share in cash or stock or about

$1.8 billion to 29% premium for kayak shareholders and comes just about four months after kayak went public. priceline's ceo jeffrey boyd will discuss the deal on "squawk on the street" at 11:00 a.m. eastern time this morning. this morning we are trying to rise above politics and address the fiscal cliff with ralph schlosstein, ceo of evercorps partners and blackrock co-founder. great to have you here today. >> it's great to be here as well. >> we have some problems, we have to come up with a solution, fiscal cliff around the corner, markets are obviously concerned based on the reaction in the last couple of days but it also seems like the politicians have kind of been stepping in and entrenching themselves right where we left things off. is there a way that we can find a solution that brings both sides together? >> yes. first of all i think you have to look at the political context of the last four years.

in 2008, the president won a very strong victory. the democrats picked up seats in the senate, held the house, and probably came in with a view that was a little bit too strong of a mandate, passed a bunch of legislation with just democratic support. 2010, the country rebelled against that. senate democrats lost seats, republicans took over the house, so the period 2010-2012 you have the republicans feeling we've got a lot of momentum, and wanting to take the presidency as well and hopefully the senate, so the politics of it were let's not do anything that makes it easier for the president to get reelected or for the senate to be kept democratic. basically gridlock. that's behind us. we now have the president reelected.

we have the senate kept in democratic hands. i think there is very broad agreement that these long-term fiscal issues have to be addressed. there's very broad agreement no one wants the country to drive over the cliff. we have a weak economic recovery -- >> paul krugman. >> some people do on both sides, that's what's weird. >> on the fringes. on the fringes. good government happens from the center, and i believe you'll see both the republican leaders and the president and the democratic leaders moving toward the center. >> what does that look like? >> what does that look like? >> yes. >> well i believe, i always like to talk about the three bs, it has to be big, $4 trillion or more. it has to be balanced, balanced meaning between taxes and between revenue. >> balanced how? >> you're describing simpson-bowles. we have to get through the fiscal cliff first. >> there's lots of models out

there. >> what we think of simpson-bowles but the fiscal cliff is hitting us first. >> two aspects of that are important. one is we have an incredibly contractionary set of events that has to be avoided. i don't know anybody who wants to weaken the economy. it serves no one's interests. i believe one way or another we will get through that in the lame duck and i don't think all the longer term issues will all be resolved particularly if they're going to be resolved -- >> the can kicking exercise again? >> no, i think it will be a let's paint the outlines of a picture. >> put something up front, put a downpayment on it. >> and that holds people's feet to the fire about filling in the colors after that, because look, what's likely to happen on the tax side is some combination of reform and increase in revenues, and that can't be done in two months. >> do you believe president obama is not going to push for

increasing the marginal tax rate, not the effective tax rate, the marginal, the real marginal tax rate over 250? >> i think the president believes very strongly that we need significant revenues to help address this issue, and that the best place to go for those revenues is not from increased business taxes, not from increased taxes on the middle class but asking those of us who are -- >> but with that said he won't do it -- >> no, no, no, wait a second. there's plenty of ways to do that. >> right. >> one way is to just increase rates and cobble that on to what is already a pretty swiss cheese whole tax system. another way is to broaden the base and keep rates constant or even lower them a little bit, and there are ways to broaden the base. one is to get rid of a bunch of deductions. another is to cap the amount of deductions that wealthy people

can take. there's a third way. you could impose an alternative minimum tax only on the most wealthy people and perhaps rope into that at maybe a lower rate capital gains and dividends. there are lots of ways to do this without necessarily raising the top rate. >> one thing you said is broaden the base, and that is something that the president has campaigned against, at least for what he's doing right now. when you say broaden the base, that means people at the lower income levels have to pay in to taxes. >> broaden the base means broadening the portion of people's income that's taxed, so you look at the individual tax rate and the corporate tax rate. there are huge numbers of so-called deductions, credits. >> money that you're allowed to tax. >> those are expenses. >> if you're talking about taking out the working credit for child care, if you are below a certain level then you are talking about affecting folks more. >> you get the 20,000 thing.

>> and look -- >> that's in combination, you broaden the base. >> but it just means more money is available to be taxed than normally would be. >> let's be fair. we have an aggressive tax deduction for ethanol. if the government were spending money to subsidize ethanol, the republicans would criticize it as being a ridiculous expenditure but we have a tax expenditure that does exactly that. there are an awful lot of these things in the tax >> on both sides. >> on both sides and they are wasteful for our country. >> i cannot believe how reasonable you're sounding today. i'm not sure -- did you have a lot of sleep last night? >> i think it's just that it's past the election. >> and i said this, mcconnell no longer wakes up and goes to sleep thinking i'm going to make this guy a one-termer and obama no longer thinks --

>> i hope you're right. >> he doesn't need to be reelected and mcconnell, the republicans don't need to keep him from being -- so both sides are in a position, that's what you're saying. >> joe, neither you nor i are as rich as governor romney so we can't bet $10,000 but i bet $1. >> wait a second. that's a cheap shot and i am nowhere near as rich but i'll bet you, i don't have to double what you're worth to get to romney. >> i don't -- >> see! >> ralph we cut you off before, you said there were three bs, the first was big, the second was balance. >> the second was balance between taxes and here again, let's talk a little bit about balance first, okay? because you have this massive schism between what's balanced. if you look at 2:1 or 3:1 or 4:1. >> in terms of spending cuts versus revenue raised.

>> spending cuts versus revenue raised, 2:1 to 3:1, sounds like a massive gap. if it's 2:1, it's two-thirds expense reductions and one-third tax increases. if it's 3:1, it's 75/25. the difference between those two is less than 8%. 8% of $4 trillion is $320 billion over ten years. that's $32 billion a year out of a $3.5 trillion plus budget. it is less than 1%. so we're talking about less than 1% of the budget. >> but it's being able to claim victory so how do you get both sides to the table to not need to say we did it. >> i think victory is two things. number one, getting past the fiscal cliff in a way that doesn't derail the economy, and i think the second thing which is really important is that we

have to do this in a way that doesn't make our politicians look like they're running a third world banana -- >> if thes. does the 250 thing -- >> back end loaded. >> we agree to it now but it kicks in two years? >> we have some of it but if you look at the curve of the effect it has on the budget. >> the spending cuts can't be front end loaded. >> because we'd go over the cliff. >> the action has to be immediate but they can phase in over time as the economy gets stronger. >> quick, if obama talks about 250 today and above, will you be disappointed, happy? >> they have to posture. it's expected. yo to hear it. >> i'd like to see him be, reach as far as he can to the center and i think it serves his interest to do that, and i

thought that the tone of some of speaker boehner's remarks was constructive, and i suspect the president will be the same way, and look, let's not ignore the fact in his speech that he gave on election night, he identified four priorities. the first two were fixing our fiscal issues and tax reform, okay? that is a place for common ground. >> ralph is going to be our guest host for the rest of the hour, so we have a lot more to talk about. >> our really newly reasonable guest host ralph schlosstein. amazing. hedge fund tpg axon putting pressure on sandridge and want them to replace their ceo and consider putting it self up for sale. we'll speak to ceo dinakar singh, who owns more than 4% of

the company up next. comments? questions? send them to @squawkcnbc on twitter. follow the show and look for updates from andrew, becky, joe and the "squawk" staff. "squawk box" on cnbc, and on twitter.

look at the shares of jcpenney taking a hit after releasing earnings just moments ago. the retailer reported a loss of 93 cents a share, excluding certain items, much wider than estimates of just seven cents. i'd like to know more about this. 98 cents versus seven cents for a loss? revenues -- that's not good either $2.93 billion compared to $2.37. it was hurt by higher than expected level of clearance sales, that's bad if you stock up on stuff nobody wants and you have to do it on clearance. andrew, jcpenney -- >> it was supposed to be everyday low pricing. that was the whole plan. >> it's gotten more interesting because it's a soap opera because of ron johnson and ackman who thinks he's great. i could be a great salesman of

apple products. i could design stores. >> we've been talking about this for months. >> does that mean you can go in and pick fashion stuff? >> the other problem is they came out quickly with a new ad campaign, flashy and cool. the question was, a, by getting rid of the sales, you got rid of a huge number of your shoppers and you're trying to lure new people in, if you don't have the fashions when they come in, they're disappointed, walk out and never come back. >> tim cook fired his retail guy who took ron johnson's job. all sides of this is not looking up. >> where is ackman, average price on jcpenney? >> that is a great question. i will try to get you the answer. i don't have it on my -- >> a little bit of a mixed record with retailers. >> their comp. store sales for the third quarter were down 26.1%. holy cow. >> factor out the items in, that's impossible. >> comp. store sales for the third quarter declined 26%.

>> we'll get an analyst to call into the show in a moment so we'll talk about that. we have a hedge fund titan to talk about the markets, tpg axon has a 4.5 stake in sandridge called for that oil and gas company to consider putting itself up for sale and joining us in a cnbc exclusive is that hedge, i called you a titan, founder an ceo dinakar singh with the reasons why. before we get to the reasons why, given what's going on in the markets, dinakar, lay it out, how are you thinking post election the past three days. is there a bottom, if there is, where is it and how does the fiscal cliff conversation impact it? >> we think the script is playing out the way they expected. we told investors they ought to be cautious about the market and cyclicals and once the election happened it was inevitable people would focus on the fiscal

cliff. >> you were already set up for this? >> yes. when you look forward you need to calm down. this isn't the world crisis where the world could blow up. it is whether gdp will be three two are two or one. at this point my guess is it's fine. the worst is probably over. it's going to be a tough number of weeks because there's going to be a lot of yelling and screaming. i think people are underestimating the odds of no deal happening but once the year comes and grover norquist tax pledge suddenly isn't an issue, people will strike a deal and get on with life. >> dinakar saying the market can reprice 1% gdp or zero or a recession is night but doesn't price 10% unemployment for the people that are unemployed very well. that sounded callous and i'm with you in a certain way. >> my job is to forecast. what i think is good for the country is at some point in the

next number of weeks they'll get a deal. i think it will happen after january 1st, not before but in the next number of weeks and months, get a deal and for businesses you have more predictability. >> as an investor if you looking at this and saying buying opportunity, everyone is missing the boat? >> in some places, yes. not in general. >> in some places, what places? >> plenty of stocks balance sheets are great and they've got growth. aerospace suppliers trading at 12 times earnings for earnings that will be growing for the next number of years. companies like dollar general, unlike jcpenney. >> you have gotten yourself in a bit of a fight. you've brought the fight to them to sandridge. >> sure. >> what is going on with this? >> first this is one of the cheapest stocks in the world, stock trades at six and this is a stock that could double or triple over the next year or two if they do reasonable things. sometimes you need heroic efforts to create value.

here you need not to screw it up. >> you hate basically everything about this company except the company. >> actually we are optimistic. we hope -- we've been building over the last year, known the company for longer and the good news is the value kept getting better and the bad news is our view of management was worse. we hope they'd turn a new leaf, after all the wheeling and dealing going forward they'd be focused. our view is it's not so. >> what is the upside if you get it right? >> this should be a $12 to $15 stock. >> if what happens? >> if the market just believes that they're not going to go and screw it up with more deals. the value's already there. if you look at where other oil and gas companies trade based on their asset value you don't need to build values, not screw it up. the problem are three things, one, management has done a deal every year that transformed the country and changed the picture. secondly when you look at the

spending, he spends too much, can't pay for it and has to do another deal to try to pay for it and the last thing is this is the worst corporate governance i've seen. >> what's the chance you get rid of the ceo? >> i think over time good. i'm not sure he's going to volunteer. >> are you communicating with them? >> we are going to meet next week. from our perspective we declared we were being active last week. we've done this on occasion, whenever we've done it we've been dead serious. the two quotes, someone was telling me make sure the juice is worth the squeeze. harry truman said if you're going to poke somebody in the eye, stick it all the way in. there's value here. >> i like that. >> and i think it's very -- >> like the art of war here. >> it's good. >> i think in this case what is important is there's a lot of value and this management team has really hurt shareholders. the highest paid ceo in the energy sector despite their stock being the single worst over the last five years, the middle of the lehman crisis he took $70 million from the company for his own gas

interest. that's awful. >> dinakar, thank you for being here. if we can put it back up on the screen, sandridge did provide us with a statement, given you've just said some very relatively nasty things about them, let me say what they have to say. "the board and management value the opinions of our shareholders." doesn't say this but including you i think hopefully. "and are always open to constructive engagement with them, while our perspectives on various points made in the letter from tpg-axon differ in many instances we agree that sandridge has valuable assets that we need to focus on improving performance for shareholders. the board continues to actively work with management in taking steps to improve shareholder performance." >> who said that? harry truman, just to put the eye out? joker did that. >> i don't want to sound callus.

in this case shareholders have been hurt, there is value and someone has to stand up and deliver that value. >> i'm not clear whether you pop the eye and kill the person going into the brain or you're not really sure? >> harry is dead so i haven't been able to speak with him. >> the buck stops here. >> harry truman had another good line, after the war, he had a bunch of economists in the room and he said, what should we do to stimulate growth and control inflation and all of them said on the one hand you should do this and on the other hand you do that and he turned to one of his advisers, what we need around here is a one-armed economist. ♪ i help pay the doctor ♪ ain't that enough for you? ♪ there's things major medical doesn't do. aflac! pays cash so we don't have to fret. [ together ] ♪ something families should get ♪ ♪ like a safety net

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intervene before the economy falls off the fiscal cliff the occupation safety and health administration's funding would be cut by over $44 million, requiring 81 employee layoffs and 2,100 fewer workplace inspections. if we want to improve our schools... ... what should we invest in? maybe new buildings? what about updated equipment? they can help, but recent research shows... ... nothing transforms schools like investing

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welcome back, everybody. jcpenney taking a big hit after releasing quarterly numbers a few moments ago. the retailer reported a loss of 93 cents a share when you strip out certain items. the street had been looking for a loss of seven cents a share. joining us is brian nagel of oppenheimer. we've been waiting for the bleeding to stop for quite a while, keep waiting to see when the turn comes. same-store sales were down better than 26%. >> the bottom line is we have to wait a bit longer. this quarter was undeniably weak, really across the board, 26% decline in comp. store sales which i think is the key measure of most any retailer. if you look beyond the income statement further down, gross

margins were weak and expenses weren't that great. the only positive in the press this morning was that the company did say they remodeled areas of the stores continue to attract well and they said something they're tracking better than initial projections. >> 26% decline in same-store sales, total sales were also down by more than 26% so i guess you'll eventually get to a point where the same-store sales won't be dropping off of that but that's off of a lower base. when do we see the turnaround that's been promised for quite some time? >> i think and i've followed jcpenney for a little while now and attractive longer term turnaround. in my view the turn should start to happen at some point in 2013 and the key i'm looking for is for them to get further along in the store remodeling process. at this point their stores are in a state of flux. you have a small portion of the store that's been remodeled but a larger portion of the store that's being in the process of being repositioned. >> brian that's the problem.

they have had this great flashy ad campaign. i've been impressed by it, i love the ads where they say free haircuts for kids. >> you go into this dump of a store. >> you go into a store not fixed yet as a consumer you're not walking back in. fool me once shame on you, fool me twice shame on me. what gets consumers back in the store after they've been disappointed like that? >> i don't disagree with what you're saying. i think eventually these consumers will see a more fully reformatted store, and that's going to take time and the key for jcpenney in my mind is to make sure they don't sort of say break the business before this happens. from what i can tell the balance sheet remains in decent shape, continues to buy them time. i think a lot of investors are on the side lines at this point waiting for more evidence this is going to happen. >> how much time do you think they have? what would you give them? >> well, from a balance sheet perspective it depends on the

magnitude of losses but you probably have another few quarters. from a shareholder sentiment standpoint that to me could always move lower but it's probably near a low. looking at the stock, indicated around $20 this morning. and you have 30% shortages, so the sentiment seems to be pretty negative almost washed out at this point. >> brian, thanks a lot. appreciate your time. >> thank you. united continental holdings says that hurricane sandy cost it $90 million in revenue, $35 million in profits during october, more than 5,300 flights were canceled. join us is the president and ceo jeff smisek. great pair with united, a multiyear difficult process bearing fruit at this point. >> indeed. >> i hope we have enough time. andrew will try to talk to you a lot. he lives in manhattan, flies out of jfk and laguardia all the

time. >> newark. >> you're not welcome in newark. if you fly out of newark like becky and i do, it's on you nighted. . >> i fly silver platinum something on his airline. >> so we'll let you have some questions. jeff, let's start with what has been, we live in new jersey. we've had a tough couple, with he no he what sandy and this latest thing, they even named it, athena, what did it do to continental? did you change the way you canceled flights in advance? >> unfortunately we're pretty experienced in this because half the airline came from houston where we have a lot of hurricanes. first of all our employees i think did a tremendous job, not only taking care of customers but taking care of each other and this is stressful for everybody. it's important to precancel so you're not stranding customers. it's much bet are for customers not to go into new york in the case of a hurricane. we canceled an awful lot of flights, it's the right thing to

do. you want to know before you get there. >> are people deciding this, is there a way a computer can use algorithms to decide which ones to cancel? >> it's both. we have a lot of experienced people networking center in chicago and they have a lot of experience in making sure that we don't have airplanes and customers stranded. safety is important and we're not going to operate a flight if it's not safe so we'll err on the side of safety all the time. >> there are also financial considerations, too. no one needs a plane, a full plane flying three people to where they got to go so you've got to figure out how to cancel and get the plane full when you finally get it but sure everybody does get there. >> it's logistically a nightmare, you have to make sure crews are there and fuel. it's complex. you have a place to put the crews, hotel rooms. >> maintenance issues with the planes. >> at newark we were able to get

gasoline in for our own employees so they could come and go from work and make sure our own co-workers had water, they've got ice, we get them some food, you know, make sure we take care of our co-workers so they can take care of our customers. >> all right so you've navigated through this literally. now we're at the fiscal cliff and could be worse than sandy and athena combined. >> it could. i've got a lot of faith that ultimately our politicians will work together. >> why? >> because they don't have a lot of choice. this is something they can't let occur so maybe it's naive but i think they'll come up with a solution. they have to. >> what would happen if they didn't? >> it would be disastrous. >> for you nighted? >> all the programs get cut, faa programs that get cut, things that get cut across everything and it makes it difficult for to us operate. it makes it difficult for the economy. >> slower the economy, people aren't traveling. >> the uncertainty you get in the economy, the concern, the potential second recession would

be bad for everybody, certainly bad for us. >> as an airline you're bait on how much something affects you. it might not affect general mills as much but for you. >> we're tied closely to gdp without question. >> and unemployment. >> it would be tough and very bad. it would be bad for everybody. >> do you have a game plan in terms of talking to the board saying if this happens here is what we have to do. >> if it happens ultimately the demand would fall off and we'd have to adjust capacity for it just as we do all the time. >> have you mapped out a plan? is there a deck somewhere inside united that says if x happens we do y? >> we're good at moving swiftly if we have to pull down capacity and demand. i put a low probability on it. the fact is it has a high expected value. if it happens it would be really bad. >> go ahead. i've got a different question. >> i was going to ask as far as the integration goes how far along are you in customer satisfaction and pilots,

employees, because it was hard, right, it was hard to get this done. are you 80% done? >> we've done heavy lifting but we need to make sure we're getting the tools for our co-workers who want to do a good job and give good customer service. we'll focus a lot in 2013 on operation reliability and good customer service. >> you came from continental and to be honest with you i have the impression that continental was good with customer service, i'm not so sure about united. >> we have two different cultures and it takes time. you have to win the hearts and minds of your co-workers one person at a time. it takes time but we are making progress and you're seeing it every day but we've got to continue to focus on making sure that people understand we are in the service business, our co-workers want to give good customer service. we're giving them the tools, brand new front end to the passenger service system, very slick, better than anything they've had before and a lot faster. you deliver the tools.

they want to do a good job. >> you have to deal with the public under the most trying circumstances which i watch things happen to people that work for -- it's hard for them. >> a part of it is because the airlines have done a good job from the shareholders' perspective in making sure capacity is better fitted, i've read an article in "usa today" come thanksgiving the holiday season, the planes are going to be 90% booked, that's great for the airline industry, means you guys are filling all the seats. it means for the consumer it's more of a rough and tumble ride getting there. does that increase problems? >> it's tougher on co-worker, tougher on customers but the fact is we for too long had way too much capacity chasing way too few customers and you ended up losing money. that's not good for anybody. we have to operate this as a business. >> american airlines, should it merge with u.s. air? what should happen? >> i don't know whether it will. i think consolidation has been good for the business without question.

>> was that good for your business, better for your business? >> it's a mix. u.s. airways is a partner of ours, if u.s. airways merges, it would leave the star lines, that would not be good for us but on the other hand consolidation would be good and the benefits would far outweigh the cost. i think consolidation is a good idea. >> what are the benefits of consolidation? >> we've had way too many business plans chasing way too few passengers and way too much capacity in this business, it's been a fractured business and consolidation resulted in much more rational pricing and discipline. >> not just for consumers. >> i think it's good for consumers to have healthy airlines that will be there today and be there tomorrow and can make the investments in the product and the root structure. >> 787, would i know if i got on it would be so much better? >> you would know. it's incredible. >> why? >> because it is a quiet airplane, it's a spacious airplane.

it's got great humidity. >> you don't dry out. >> more oxygen, big windows. it's a terrific airplane. it is so quiet, almos like being in an electric car. it's something else. >> wifi, i need to know. >> it's coming. >> you are the laggards in this category. i pick a flight needing the wifi if i have to get to california it's an issue. >> we waited until we could get big pipe satellite based broadband. it's not your grandfather's wifi, it will be the real thing. >> stream video? >> we'll have on board streaming video. >> people on kayak looking for cheap flights from somewhere else? >> on kayak -- >> you don't have wifi? i don't know, i'm not allowed to turn on my things once i'm flying. >> yes, you are. >> above 10,000 feet. >> i know we have to go. can you explain this, why can't you use your phone on the ground? >> because there's an faa rule

against it. >> does that rule make sense to you really? >> doesn't make a lot of sense to me, no. >> anything else? >> no more free peanuts. >> this poor guy walked in and had to deal with all of our complaints. >> i'll get you all the peanuts you want. >> i like paying for the -- i can finally get something i want. >> i like that, too, i don't mind that at all, it's something i want to pick up versus something else. >> is that really chicken? that's what i want to know. i saw one with three legs. where did that thing come from chernobyl farms? >> it's really chicken, joe, i promise. >> jeff thank you for being a good sport with us. >> my pleasure. >> next time you run a business i think you want a business-to-business rather than business-to-consumer business. >> i'll remember that in my next life, ralph. thanks for having me. still to come, concern over the looming fiscal cliff. the president's going to be making remarks about it today, also former senator judd gregg and former governor ed rendell, opposite sides of the aisle,

they'll talk about how they can come together and find a deal. at :15, the chairman of the fcc will talk to us about the spectrum shortage and how the election will affect the telecom industry and 8:40 eastern, congressman frank pallone will talk about rebuilding his state's biggest tourist attraction, the jersey shore, very hard hit by sandy. "squawk box" will be coming back after this quick break. if lawmakers cannot agree on a plan to avoid the fiscal cliff, funding for school improvement grants would be cut by $44 million, negatively affecting 67,000 students across the nation. a short word that's a tall order. up your game. up the ante. and if you stumble, you get back up. up isn't easy, and we ought to know. we're in the business of up. everyday delta flies a quarter of million people while investing billions improving everything from booking to baggage claim. we're raising the bar on flying

and tomorrow we will up it yet again.

we're back on "squawk." look at futures after a couple of rough days, we'll see how rough today turns out to be. we have red arrows, dow jones would open up about 47 points off. s&p 500 off about 4.5 points and nasdaq would be off as well. when we come back we have some final thoughts from this hour's guest host, ralph schlosstein, the ceo of evercorps partners. at the top of the hour joined by former senator judd gregg and former pennsylvania governor ed rendell to talk about solving the fiscal cliff. jpmorgan chase chairman and ceo jamie dimon will join cnbc at 4:00 p.m. eastern time today

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we're back this morning. we're going to get om final words with our guest host ralph schlosstein this morning. we have to talk treasury secretary, if you'd indulge us. your boss is one name that comes up frequently, sometimes you have even come up in this conversation. your views on what you think is going to happen? >> well, there are a lot of good

candidates. it's the president's choice, and i know a number of them who are mentioned in the articles, and i think it's all speculation at this point. >> steve liesman will come on and do a report and talk about it. if you could have one person, if you could choose, who would it be? >> i think that's the president's choice. >> oh, come on. >> i'm not going to do that. my partner, roger altman, is a superb candidate. pains me to say that. i told him yesterday i'll say nice things about him even though it's not in my interest or our shareholders' interests. he has a highly unusual combination of government experience and business experience, successful in both places. my former partner larry fink is a superb candidate. i don't think there's a person in the u.s. today who has a

broad knowledge of the markets and the players in the foebl financial markets as does larry. jack liu is also a good candidate because of fiscal issues and the budget will be central to this next four years. >> the other topic we haven't talked about is banking and what happened to the world of banking and what's going to happen to the world under obama. there are a number of rules and regulations as part of dodd-frank that haven't been put into effect yet. >> right. >> now more likely than not they will. your sense on how banks will have to adjust? >> first of all, there are a number of things at work here. in every time in our economic history that we've had a crisis, there has been legislation passed to address it, and typically that legislation has gone a little bit too far. that happened with sarbanes-oxley in 2002 in reaction to enron and worldcom and there are certainly elements of dodd frank even though quite

honestly they're beneficial to our business model at evercorps that i think went too far. i think the volcker rule is an example of that. you don't regulate the intent of trading. you have risk requirements and that's how you avoid these kinds of problems. so but i would say also to the administration's credit they've been struggling with how to come up with regulations that are consistent with the law and that are also not destructive to our economy. >> your peers in the business who have taken a very aggressive stance some of them against the administration, do the fences get mended? what happens? >> first of all i think -- >> does it matter? >> i think we're going to go through a period of fence mending among democrats, between democrats and republicans, and between various constituencies in the private economy and

government and i'm optimistic about that. i think the president is not an anti-business, as he understands that the private sector generates jobs. look you don't have -- since. president obama came into office the stock market has doubled. that does not happen without profits, more than doubled. >> you also know there's been a lot of rhetoric and a lot of bruised feelings between wall street and broader business community and washington. in order to kind of see a better relationship, what do you think needs to happen? who needs to offer the olive branch? >> look i think the president is very conscious of the importance of the private sector. i think some of the rhetoric that you have in the year before an election on both sides is not constructive and typically that gets put behind the evening of the election, and i take it at

face value the president believes he's president of the entire nation and he's going to do his very best as i think he has to lead the entire country. >> there's a group of ceos, the fix the debt organization, more than 80 s&p ceos signed off and said they're going to try to support both sides to come together. >> right, i think that's a noble enterprise, and i think it will be important and i think there's one thing about that, that's really important, typically business executives don't use their political capital to speak on issues of national importance. they use their political capital to talk about things that are either important to their industry or to their particular country. so i think it's a really good thing that leaders of the business community are rising above those individuals. >> a good place to leave the conversation, ralph schlosstein, thank you. >> you didn't mention erskine bowles. it won't be him. >> it's the president's decision. he's an incredibly talented guy.

>> that would be a really big bipartisan olive branch and that would, i would fall over. i probably would fall over dead. >> we're going to continue that part of the conversation in the 8:00 hour with steve liesman. >> we're lucky we have a treasury secretary now who is extraordinarily able and has the confidence of the president and that's really what you want in the next treasury secretary as well. >> ralph schlosstein, thank you for being here this morning. >> thank you. >> appreciate it. up next we'll talk more about the fiscal cliff, anxiety building as we get closer and closer. can the government steer the economy away from tax increases and spending cuts. what everybody says we need, tax increases and spending cuts. was that "groundhog day"? no, that might be laverne and shirley. >> thelma. >> thelma and louise. >> the chairman of the fcc is coming up. comin' back from the ,

and all of a sudden, ka-plam. it blindsided us. what is it? our college savings account. how do you think it happened? not sure. i think something we bought a while ago turned out to be something else, annnnnd, i remember a lot of other stuff in there had the word "aggressive" in it. is everyone okay? well, now, yeah. who knows later. ♪ ♪ nespresso. where there's a coffee to match my every mood. ♪ where just one touch creates the perfect cup. where every cappuccino and latte is made with fresh milk. ♪ and where clothing is optional. nespresso. what else?

you know, one job or the other. the moment i could access the retirement plan, i just became firm about it -- "i'm done. i'm out of here." you know, it's like it just hits you fast. you know, you start thinking about what's really important here. ♪ ♪ fixing america's fiscal crisis. >> let's rise above the dysfunction and do the right thing together. >> judd gregg and ed rendell are rising above partisan politics and trying to work together to push for a deal on the deficit.

and competition in the telecom industry, the chairman of the fcc is going to join us on the push to expand broadband service and the direction of the commission in president obama's second term. plus the road to recovery from superstorm sandy. congressman frank pallone on what it will take to rebuild the backbone of new jersey's tourism industry, the jersey shore. the third hour of "squawk box" begins right now. welcome back to "squawk box" on cnbc, first in business worldwi worldwide. i'm becky quick along with joe kernen and andrew ross sorkin. in our top stories, president obama is set to address the issue spooking the markets this week, the face kaiscal cliff. he'll make an appearance at the white house at 1:00 p.m. eastern time. you'll see coverage live on cnbc. in the meantime we're watching shares of jcpenney. the retailer came in with a loss of 93 cents a share when you

exclude certain items, wider than the street's expectations of a loss of seven cents a share. revenue came in at $2.93 billion, compares to a consensus of $2.73 billion, but every number across the board was a disappointme disappointment. we also looked at the comp. store sales which were down 26%. you don't see numbers like that. disappointment maybe a drop of 5%, 6%, 7%. drop of 26% really raises brows. earlier we spoke with brian nagel, he covers jcpenney for oppenheimer. >> this quarter was weak across the board. 26% decline in comp. store sales, the key measure of most any retailer and beyond the income statement further down, gross margins were weak and expenses weren't that great. >> the stock is reacting in kind. right now the stock is down more

than 7% in the premarket. we will continue to watch jcpenney shares throughout the morning. after the last two disappointing days you might expect the futures would show a bounce back today, you would be disappointed. the dow futures are down by another 51 points, s&p futures down by 6 points. nasdaq futures as well. overseas in asia, red arrow, the kospi closed down by 23 points a drop of close to 1.25%. in europe there are modest declines, you can see right now that actually in germany the dax is down by 1.4% so the losses have gotten steeper throughout the morning. >> let's hope it doesn't stay that way. judd gregg and ed rendell will be joining us in a couple minutes to talk about the fiscal cliff. first steve liesman is here on who will be the leading treasury secretary during the debt discussion. steve? >> andrew, thanks. while it's widely speculative treasury secretary tim geithner will leave his post, there's speculation about when that will

occur. he's had that job for four years as one of the president's most trusted advisers. my information is that geithner will stay through the negotiations over the fiscal cliff and likely until a successor is confirmed or well along the way. he could leave as early as january if the new congress confirms his replacement quickly or even all the way until the inauguration. much depends on who is chose on it succeed geithner. inside pick these are potential inside picks which would mean someone already confirmed by the senate even though they'll be a new confirmation necessary. among the top contenders, the odds on money is jack lew, white house chief of staff, former head of the office of management, seen as the best pick for the fiscal cliff issue and overall tax reform. not seen as the best person to reach out to republicans and the business community or on financial regulation. there's neal wolin, favorite of the treasury secretary, u.s. deputy treasury secretary right now and lae brainard, handled

all of the international affairs when it comes to europe and china. these are outside picks, roger altman, a frequent guest on "squawk box," founder and chairman of evercorps partners, been at the treasury under clinton, ralph schlosstein who we just had on and lawrence fink. >> i'd like to see him reach as far as he can to the center and i think it serves his interest to do that and you know, i thought that the tone of some of speaker boehner's remarks was constructive and i suspect the president will be the same way. let's not ignore the fact in his speech that he gave on election night, he identified four priorities. the first two were fixing our fiscal issues and tax reform.

that is a place for common ground. >> i'll be back at 8:30 with more potential candidates and a broader discussion on what the administration could be looking for in a new treasury secretary. what is certain is that the administration is touting that both the overall elections and the exit polls showed a plurality of americans, 47% to be exact agree with the president's position on raising taxes for americans, making more than $250,000. the number rises to 60% when you put that together with those who believe taxes should rise for everyone. i think you'll be hearing that, andrew, from the president this afternoon. >> i imagine we may hear that. steve before you go, handicap this. how long will tim geithner be in the job? >> i think through the early january and perhaps as late as the inauguration. we know he's wanted to go for a while. the president appealed to him to stay, but we know he's committed, andrew, through seeing the fiscal cliff negotiations through, and making sure there's a smooth transition with his successor. >> has interesting implications

on who could necessarily get that job and we can talk more about that when you come back at 8:30. >> for more on the politics on a deal to avoid the ifisical cliff we're joined by judd gregg and ed rendell, co-chairman of the fix the debt campaign. ed, are you as impressed with me that you can actually get 47% of the people to agree to raise taxes on somebody else? >> pretty easy task. >> steve really likes that number but that is amazing. 47% will agree to raise taxes on 2%. i think could you get higher than that, couldn't you, judd? that doesn't seem that -- i like you can get 47% to agree to more government entitlements, too. how do you do it, ed? >> how do you do the deal? >> no, what do you think will finally happen, governor rendell? do you think at this point are both sides, i can tell you both houses feet are in concrete on letting the tax cuts expire for

the 250 and above. is the president going to be set in stone on that as well? ed? >> well, see, i think the president's got to, people say let's do a short term thing to get past the fiscal cliff and then do the negotiations. i believe you got to do the negotiations first on a big deal because it's the only way, the president can't sell this twice to his base. he's got to go to his base and said look we needed "x" amount of new revenue. we got it. don't you worry about where we got it from and by tax reform the rich are going to pay more. so don't worry. >> is there anything to the notion that it's not as important for him to sell something to his base at this point, because he's not going to need them again in four years? >> also his base in the senate. there are a lot of senators who wanted at least a millionaire's tax, the base wants something, their pound of flesh and -- >> that's interesting. >> my message to them, joe,

would be, look, let's do what's right for the country and if we do tax reform there's going to be additional revenue and that additional revenue will come from people who are well off so don't worry about raising the rates. >> you know what? that's exactly right and that's how i'm rising above that. i'm with you. i was with ralph on that, too. judd gregg, do you think that the president and his base would agree to that higher effective tax rates but not getting back to that 39.6, the holy grail. once they did health care the holy grail was getting back to the clinton tax rates for rich people. >> ed is right you have to do a comprehensive teal that addresses the larger debt issue in order to get past the ifisical cliff and part of that deal has to be a tax reform package which reduces rates, keeps the code progressive, keeps the distributional situation progressive but gets your rates down by eliminating deductions and exemptions and in the process you generate more

revenue through more economic activity, plus you maintain the burden of the tax burden on the higher income individuals by eliminating deductions and exemptions, and that's the way you sell it to republicans, and i think it's the way you sell it to democrats but it also has to be coupled with major entitlement reform, it has to be structured off of basically the outline of the original simpson-bowles which had significant savings on the spending side, revenues driven by tax reform agreement that basically reduced rates by eliminating deductions and exemptions and reduced the debt by $4 trillion. actually we need more than $4 trillion but that has to be the goal. once you put that agreement in place or the pathway to that agreement, that's what you're looking at here, then you can move on to moving the fiscal cliff off the agenda. >> judd, do you have professor elbow patches on that jacket, too? >> i do. i'm teaching at dartmouth now and trying to fit into the dartmouth community and be a little ivy league. >> did someone, is there like a book that taught you how to do

that, to go from -- >> no, you get a handout when you go up to dartmouth, that says here. >> thank you, professor. >> wow. >> governor rendell, i think today, no one's going to really show their hand. he's going to come, david plouffe said in "the journal" 250 and above, bush tax cuts expire, that's what we're doing. do you think we'll hear that and eventually maybe they stop emphasizing it as much? >> well, sure. it's like playing cards. you've got to have something to deal with, and you can't give that away. the president in his first term was guilty of giving stuff away too early in the process. >> now you sound like -- that's not you talking now. that's his base talking. you don't believe that, do you? >> yes, because the other side didn't respond. look, he's got a good trump card and got to hold onto that trump card but he has to use it for a good final result. >> if we're talking cards here i think the important thing to realize is that we're past the

point where people are holding their cards. basically if this was a texas hold 'em game almost all the cards have been laid out because the election is over. everybody knows their power position now, everybody knows their position relative to etac other, it's time to govern. here is an opportunity to govern and i'm hopeful the president and i think the speaker's language yesterday was very constructive are willing to move forward and govern and the way you govern is reach a comprehensive agreement on the debt. >> judd, i do think boehner's conversation speech was something that handed out an olive branch. i don't think mitch mcconnell's was. >> neither was harry reid for that matter. >> that's fair. >> this agreement, becky, is going to be between the speaker and the president. be honest if you want to do this agreement the speaker and the president should sit down without any staff in the room and reach the parameters of it. >> can they do that before boehner goes with his party for just to make sure he's still the leader? i've heard you have to wait until the end of -- >> becky, i totally disagree

with that. >> okay. >> the speaker of the house has control over his caucus, not control but he has the confidence of his caucus and i think it's sort of a "new york times" spin event that the speaker doesn't have that. the simple fact is that the speaker does have that. ing to be a comprehensive it's agreement where the entitlement savings will be justified, will be significant enough so that you can justify tax reform that can be sold to the membership of the house. >> ed, you need to respond to that? >> no, i actually agree with that, nancy pelosi did it for health care and got the blue dogs to go along with it and bainer can do it. >> judd, "new york times" does that mean fallacious, is that the same adjective? >> actually in my dialect, that is correct. >> i'm sitting right here. >> i've been quiet like a church mouse but i'm sitting right here. say it to my face! >> synonymous with fallacious. >> invite me down.

we'll discuss it. it says fallacious. >> oh, thank you, governor rendell, thanks, it's fun. you guys are good together. >> they are. they can reach agreement. >> they requested them for a rise above pin. i think putting it on the collar is too much. i love neck tattoos. go to cnbc's facebook page and request your very own. i didn't know you could do that, for free? for free? >> for free. >> that defeats the whole purpose of this. go to facebook -- this is a revenue enhancer, go to facebook.com/cnbc, click on the "rise above" tab, just fill out the form, swear on your first born you watch cnbc exclusively from now on, click and submit and your "rise above" pin will be on its way at no cost to you.

>> you don't have to sign any forms or affidavits. >> we don't charge or require them to watch. >> apparently we have to get to commercial i'm being told to pay for all of this. coming up the future of telecom, the chairman of the fcc is going to be joining us next to talk about broadening the wireless spectrum and competition in the industry with a second term. president obama. the bottom of the hour more from steve on the candidates to head the treasury department after geithner steps down. as we head to a break look at u.s. equity futures ticking lower in the last few minutes. i don't like to bring you that news but we'll keep you updated. >> part of it is comments out of greece. [ male announcer ] this is steve. he loves risk. but whether he's climbing everest, scuba diving the great barrier reef with sharks, or jumping into the market, he goes with people he trusts, which is why he trades with a company that doesn't nickel and dime him with hidden fees.

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we're back. opening up for spectrum for mobile services is the key initiative for the administration and jewel yauli n genachows genachowski. we're in the midst of sandy and a lot of people lost phone service, when you think about what telecom companies could have done pre-storm is there anything they should have done

differently? >> these storms are obviously big issues for all people affected, big issues for communication because people rely on communications for their jobs, their families and you need communication services during times of emergency. three things that come out of this storm, one at every one of the communication companies broadcasters, people who put themselves on the line in the storm to perform the service, they thank their folks because they left their families to help people. two things, we see the relationship of our communications networks through our power grid. power goes down, the biggest hit to our communication network. we have to struggle with that as a society, recognize we need to take the steps so our communications networks are up and running even when power goes down and the third thing we saw every communications provider has central facilities that when they go down, it hurts not only them at the other providers and this one, a major verizon switching facility in lower manhattan went down, it hurt

verizon but it also hurt the other carriers because all the mobile carriers -- >> that wasn't a power issue. >> second point is power, the third point is damage to major -- >> is that a call for some form of additional regulation or some kind of mandate that you want to put on telecom companies? >> we need to look at this. we are looking at this. there was a storm a few months ago in the mid-atlantic that knocked out 911 service in a couple of big areas in virginia for two days but we can't let that happen. we can't have a storm and 911 service go out. we're investigating that. this gives us new lessons to learn. one piece of good news in sandy is 911 didn't go out and that's not an unimportant thing. >> is that a call for redundancy of systems, where you switch centers somewhere else that's far away that could pick up immediately? >> we need more redundancy, resiliency, we need communication service to be there when we most need it. >> talk about telecom mergers. first of all obama is keeping

his job. are you keeping your job? >> i have no plans to go anywhere. this is an exciting space, a ton has gotten done in the last four years, this is a lot to do. >> you blocked the at&t/t-mobile deal. we saw a big investment in sprint. at&t just came out and said they're spending $14 billion more to build out their lte network. do you look at what's happening and say it was the right decision or wrong decision and what does it mean for other telecom companies that want to do a deal? >> absolutely the right decision. over the last four years we've approved dozens of transactions in the mobile space and they're efficiency transactions that deal with the spectrum crunch which we should talk about. small number of transactions raise competition and the at&t/t-mobile deal, we blocked t i have no regrets. one of the things i'm pleased to see is that. >> they argue they would never be able to make an invent.>> th

trup. >> let's come to spectrum, what drives private investment in the space? competition. year and a half ago when that deal was announced we were on the doorstep of duopoly in the mobile space. if you believe in red blooded free enterprise competition you have to be concerned about duopoly. year and a half later instead of being at the doorstep of duopoly we see improvement in the competitive dynamics in the mobile marketplace. >> t-mobile may go away anyway. >> like those are the only two ways to do it, you know that's not true. you know the market is much bigger than two companies with cell phone spectrum. there's competition everywhere and here we are, we still got crappy coverage, the 99% of the country, everybody would have benefited but you made a point to what end? cut off your nose despite your face? >> avo toyed duopoly. >> i don't think there's any high-tech technology product

that costs too much to have. >> what happens in my job, people come to me at different parts of the value chain and say i'm worried about duopoly and the other part of the value chain. thinking that competition is good and monopoly and duopoly are bad -- >> it's distorting whether there was anti-trust. i thought about it all along it would have benefited everyone and prices are not expensive in the first place and t-mobile is probably going to go away anyway. >> at&t has invested. >> they're not there now but we'd be at 99% coverage already. i don't like to get the overcoat walk-around. maybe that should go by the wayside, walking around in the dark on the bridges in central park? it's like do you have anything on underneath that? who is that guy? >> you made the spectrum point. we should talk about that. this is one of the major challenges for the american mobile economy. couple of points. in the last four years the u.s. has regained global leadership

in mobile. four years ago we were talking about mobile innovation but we were talking about it in south korea, japan. >> we are the biggest innovators? >> europe had got an head of us on 3g. four years later the u.s. is leading the world in mobile innovation. we invented the apps economy around the world, people are using u.s. apps, mobile operating systems, we've gone in the last four years from 20% of global mobile devices having american made operating systems to 80% and networks we're leading the world in deployment of 4g at scale. this is a big deal, the next test bed for mobile innovation. the problem is that these new devices we're using more in the u.s. than anyone else, these smartphones. >> you have an iphone, apple guy? >> this is an iphone. i use all the devices. this one is on verizon. these devices put demand on our air waves, our invisible infrastructure, not a little bit more than the phones you had before, it's not double, it's not triple.

25 times more. tablets put a demand on spectrum, that's 150 times more. we need to take some bold steps with spectrum policy to address that. >> we still have dropped calls. >> julius thank you for being here. we have to have you come on in. i want to talk about phil falcone and his broadband issues, a whole mess, a whole separate issue.

welcome back, everybody.

we have breaking economic news just a few minutes away. we'll get import and export prices for october, and then we have congressman frank pallone of new jersey, he will join us to talk about his district, which includes some of the areas that were hardest hit by superstorm sandy. data just a couple minutes away. "squawk" will be right pack.

welcome back to "squawk box." rick santelli here october import prices rise half of 1%, that's about half of 1% more than we expected. we were looking for unchanged. now that of course is month over month. if we look at a larger view, year over year we're up 0.4, which is a wider margin of disparity between expectations. i was looking for down half of 1%, many were looking down 0.4, so on the year over year as well some subtle revisions to last month, nothing to speak of. maybe the biggest number yet to come out today would be preliminary november university of michigan sentiment, that's 955. i guess it's easy today to tell everybody what's going on in traders' minds. we talked about it yesterday. the lower stocks go and the more aggressive fashion, the louder they scream to rise above!

the markets are screaming for a solution, and i'll tell you what, i think the market activity over the last couple of days probably pushed the president's timetable in terms of giving us a little glimpse from the white house of how he will figure in to solving the issue. back to you guys. >> okay, rick, thank you for that. i think investors would like the stock market to rise aabove. back to steve liesman with more on tim geithner's plan for the treasury. >> there was some expectation he might leave next week and i've seen some reports on that and my information is that he is not going to leave next week. he'll be the first guy on the fiscal cliff negotiations, he's already been doing it and secondly that he's going to kind of stay through this negotiation and until a smooth transition for a successor is assured. it doesn't mean confirmation necessarily but probably. >> if it does mean confirmation doesn't that mean all of the business guys on the list, larry

fink, roger altman or ralph schlosstein automatically taken off the list? >> that's a good point, andrew t favors those who by the way -- >> have been confirmed. >> you have to do a new confirmation so it's not like it's a gimme but the fact they were confirmed previously by the senate is something that makes it easier. let's look at the list of things that you might want in a treasury secretary today and see where the odds on guy, jack lew, the chief of staff, very good on the fiscal cliff, pretty good on corporate tax reform, the two strengths but what about the other parts that you do, deal with china, you deal with europe. you got to have an outreach to the business community and not to mention the republicans as well. geithner apparently has a decent relationship with at least some republicans and then there's also regulatory reform, is jack lew the guy on regulatory reform? these are some questions raised to me as i've talked to people around this. >> you're not putting checkmarks next to those things.

>> i would not put checkmarks there. maybe you want to go outside or maybe there's others inside like neal wolen, the undersecretary of the treasury. >> don't at this point in the game if you're obama you want to say look i know the whole business community hates me. i don't know if i want to be their best friend. >> but have outreach. he tried that at the beginning of the last term and then it fizzled out it seemed. i think that's an excellent point, but he tried that with bill daley, his chief of staff but maybe he wasn't the right guy for the job. >> what concerns me when you look at the fiscal cliff and look at europe and looking at all of the things that can go wrong and thinking back to 2008, you've got to think they want someone who understands the markets so if things get in the vehicle, that has to be the most important issue and people may not want to -- >> that leads to you larry fink?

>> it would make me feel better to think someone is there if things get terrible -- >> so it would be a banker. >> i'm instructed -- >> paulson being there and how crucial that was. >> that was crucial and geithner being there the follow-up guy. >> right. >> when you know what hits the fan, who is the guy you want to be running the fan? >> he'd do trumpka i think. >> since we're talking about -- >> a couple of the names out there, the acting director of the omb, venture capitalist probably going to get the omb job but one other guy and we didn't talk about erskine bowles. my understanding is he doesn't really want the job. >> he talked behind obama's back. where is your pin? >> i only had the bottom half. i lost the magnet. >> likely story. >> there's erskine. >> fall behind. tumble over the cliff. >> sinking down is what i'm

doing. >> tumble over. >> the other thing i heard obama folks like people in their generation, except when it comes to national security stuff is that when it comes down to -- >> where do you put cheryl sandberg, eric schmidt and those folks? >> who is the woman from california? who was in the clinton administration? >> cheryl sandberg. >> no, somebody else whose name i'm drawing a blank. >> god help us. laura tyson? >> yes. >> she's a chicken producer. >> no, she's a professor. >> oh, she's the boxer. there's the boxer. >> 2014-2016, i want to ask but one job -- >> i like what joe said earlier that at the end of the day the only legacy that matters any more for obama is the economy. he's going to have his legacy in obama care for better or worse. going to have his legacy in dodd-frank. the only one that matters anymore is economics. >> you can't -- there's 100

republicans. you can't single the one out that you hate. >> it was very interesting in the exit polls. i just going to to get to this quickly that the electorate sort of blamed bush for the economic crisis. that's not going to be true any more. it's not even true from today. you could make that argument he was given a bad hand. >> i went as far to say that the whole reinhardt rogoff narrative, if we go four years above 8% and crappy gdp the left will reap what it sows. >> it will reap it in '14. >> we'll finally be able to say definitively wrong-minded policies can hurt the economy and if jimmy carter had been reelected there may not have been the '80s. >> my 2014, bernanke doesn't keep the job, would tim geithner

take it? >> this is through '14. >> say tim geithner does the speaking circuit, if obama calls him and says you go be ben. >> or janet yellin, another one whose name has come up, potentially someone who would take that job but geithner is a possibility. geithner may be at the imf, not the imf, the world bank is another place. >> quickly, you said that geithner may be negotiating right now. who is he negotiating with on the fiscal cliff? >> he would be talking with the gang of eight. i heard an interesting proposal that i can't talk about just now the gang of eight and the mark warner folks. >> it's gang of eight plus mark warner, he's the ninth? >> i thought he was among the eight. >> i thought he was hosting dinners for the gang of eight. >> i thought he was one of them. >> he's been talking to the senators? >> maybe -- as far as i know. >> sounds like we have to leave it there. steve thank you and because you don't have the other side of your pin i need to say the requests have been pouring in for the cnbc "rise above" pins. steve if you want to get in on

the call to action go to cnbc's facebook page, you and anybody else can request your own, go to facebook.com/cnbc, click on the "rise above" tab, fill out the form, click submit and shows up in the mailbox as they say the check is in the mail, the pin is in the mail. >> no cost. it's free. >> you know who came one the slogan. >> joe kernen. >> i don't think i'm taking credit for that. i take credit for anything else. this is not true either. i kind of came up with it. >> you and matt. >> because i was making up funny things to say. mine was flap harder, the cliff, flap hard we are the wings. coming up the agriculture department's latest report on crops, crops, crops. jane well also bring us the update on the summer drought's effect on drop crisis.

and the devastation of superstorm sandy the jersey shore was the backbone of tourism but the damage is being measured in tens of billions of dollars. congressman frank pallone will join us to talk about the long road ahead for his district. ♪

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jane? >> reporter: hey, andrew. i'm at an auction house where, yeah, the news isn't going to be good for them later but the news come out of the usda is bearish for traders on all the crops, good news for consumers. the main thing, the main story here is corn. corn looking better, the crop, than earlier expected, they're saying global corn production will be up slightly and here in the u.s. despite this drought they're saying total corn prediction, raised it from their projection last month to 17.73 billion bushels. analysts expected a fifth straight cut. instead the usda raised the total crop expecting, ending stocks higher than expected and as a result, they're now projecting the price of corn to come down to between 6.95 and 8.25 a bushel, historically high but down from what the earlier projections were and certainly 6.95 is down a point, we've seen

a lot this fuel. soybeans same story, higher yield than analysts expected, higher production than analysts expected, and again, lower prices as a result, 13.90 to 15.09 a bushel. the usda is also raising soybean exports. wheat better than expected, ending stocks better than expected because they say sales are not, the demand isn't quite there so you expect all these prices for commodities to come down today. back to you. >> jane wells in athens, texas, please thank your backup chorus for helping you out. new jersey is trying to battle back from not one but two storms that have battered in the last two weeks. the storm damage hit the jersey shore particularly hard. it's the economic engine that powers the state's $35 billion tourism industry and the question we have today is, can it bounce back? our next guest represents new jersey's sixth congressional

district that includes belmar, asbury park and long branch. congressman thank you for being here. >> thank you. >> it's been a trying 10 or 11 days at this point. can you give us updates where things stand in the communities that were hit so hard. >> i think the humanitarian crisis is starting to ease, in other words fema is in all the towns and people have food and were in shelter but a lot of it is temporary so we need to get housing for the next few months, not just have people stay in shelters in which many of them have for the last week or ten days so that humanitarian crisis has eased but still a problem. we need housing for everyone. >> i heard will fema potentially bringing something like 400 or different numbers of those shelters that they have temporarily? >> yes, and trying to be looing at fort monmouth could be converted to housing and also bring in trailers, that's likely as well. >> in terms of rebuilding you

look at some of the shore communities in some cases the beach is completely gone, in areas for the barrier islands you can see where the bay came to the ocean and things have gotten washed away. we have before and after pictures we've been looking at. how long does it take to rebuild this, and will it? does it make sense to rebuild it, a, and how long will it take to do that? >> it will rebuild and the tourism industry will be up and running by next summer. some places are already up and running. i remember being in asbury park a couple days after and already businesses starting to open. the museum in asbury park told me it would be open by last weekend. we will recover. in terms of the beaches a lot of the beaches the sand does come back and in addition we'll try to do some beach restoration in the meantime as well for next summer. >> mayor bloomberg made a comment about a week ago saying he thought, i'm going to completely misquote him but the idea was when you really think

about rebuilding some of these places, you just shouldn't, that you should just decide there are going to be certain places it's tougher to rebuild on that in the future you'll have the problems again and maybe you really have to rethink not just the zoning and the codes, but how far back from the beach you're actually building. >> well i think some homeowners have said to me they'd like to have buyouts because they've had flooding, for example, along the rivers in some cases or the bay many times in the last few years, and others have talked about, you know, putting their homes on platforms or stilts, you know, the pilings so to speak, but i this i nk in terms the amusements, the boardwalk, fema has to rebuild it and we do beach restoration and for the most part that's been ongoing for years. we've had other storms where we've had -- >> up here along the east coast. >> it has been a question about building the embankment many parts along the shore they've had these huge dunes that have

been built in, and the areas, places like long beach island where they have the dunes were proteched. the places they haven't been able to get the homeowners to sign the easements, some of the towns got washed away. >> it makes sense to have dunes. some towns didn't have dunes said we have to put dunes in place and some of the dunes disappeared so we need to put them back. i want to assure everybody and all of you we'll be back in business and some of the towns and businesses are year-round so it's already starting to come back. >> how much of that will be paid for by the federal government and how much does the state kick in? >> that's one of the things i'm asking. lot of the towns are very small and the way fema works, 25% is state and local so we're trying to get that waived because the towns are very small. they're not big like new york city where they can afford that. we're trying get 100% paid for by the federal government. >> do you think that's likely? >> i think so. they've done it with the power lines and transportation needs but we need to have it for these long-term purposes as well like the dunes and the beach

repolicemen irnment. >> should homeowners who have not signed those easements who have not allowed, they want the sand brought back but don't want their views lost by a big sand dune. should they be forced to sign the easements before the sand is put back? >> i'm not sympathetic to those who don't want to sign the easements. it's important for us to get the job done. >> in terms of just looking around the state at other issues, is there a way to better prepare for the storms in the future or do we have to accept storms like this will come around every 50 or 100 years? >> well, no, i think you can have better protection, not only long-term protection like dune protection but better plans for utilities. i had a meeting in aberdeen where many were complaining about the fact they still didn't have power and i think you have to look at the power grid needs to be upgraded and better management or communication plans so people know when the power is coming up or where the trucks are. we need to look at those types. >> he with don't have power. >> you don't have power in a lot

of places sure. >> you look at the setting of this against the backdrop of the fiscal cliff. money will be tough by and second of all do you think we'll go over the fiscal cliff? >> we'll resolve the fiscal cliff. is it short term three or six months or can we do it for a year or mo? i'd like to see us do something more long-term and not just kick the can for a couple of months, but i'm confident that we're going to come together. there is that he real feeling now that we need to be bipartisan, with he need to work together. >> congressman pallone thank you and we wish you the best of luck. >> where is your pin? will you wear this pin? >> i never wear the pin, you mean the congressional pin? >> rise above. >> i don't have one. you can give me one if you like. >> we'll keep a bowl of them in the middle of the table. >> i'll take one, thanks. coming up next the morning buzz on wall street, where is the market going to go today? we'll check in with jaime cramer at the new york stock exchange.

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welcome back to "squawk box." futures right now indicated down 63. there has been -- i mean, i know andrew. you've been in a funk all day. >> i've been in a funk for three days. >> you're sad. you get sad when -- there are people short. >> warren buffett's probably hal happy day because he's buying. i should say -- >> he does tell us -- >> he said hopefully it will turn around. don't get personally invested in this. >> i'm not. >> okay. like cramer. cramer doesn't care. there's always a bull market. will he find it. oh, wait a minute. it's not just cramer. i thought it was just you. oh, it is just cramer. >> it's just me. >> what's going on. >> i listen to you guys. everyone is in a bit of a funk

when you have a stock like disney that's been good and consistent, not saying great things. when we figure out how could that possibly be, we come back to a lot of the different funk that advertisers don't want to spend. no one wants to go to the store. it is the fiscal cliff, the storm in the northeast or jimmy carter-like -- >> jimmy carter is j.c. j.c. is also jim cramer and also jp penny. becky thought they missed a decimal point. >> when you do mid-20s, you talk about leverage for companies, they must be sitting on mounds of inventory. they must be throwing shirts at you. i have to go by and pick up a -- >> the puffy pirate shirt they went big on. >> they were supposed to go to everyday low prices but they got

killed because they sold stuff at clearance. >> i would rather shop where jane wells -- holy cow. >> i thought about that, too. one cow mooing is endearing but when you get them together, what were they saying, let me out? >> it was congressional like. >> let me stand in the rain. mad cow, they're mad. >> jim, would you fire ron johnson? >> i would have fired him a year ago. i would have fired when he exercised his options and made all that money. does he live in plano yet? is he down there? he's been skating for years. it's a foot race between groupon and jcpenney who could have the award for the worst possible numbers i've seen. >> all right.

what a week. happy friday. the election, the markets -- >> we're tired. >> we are. well, you're not. >> he's never tired. >> by the way, jim, you were up tweeting before i even woke up this morning. the second i woke up i saw a bunch of tweets. you're not tired. >> i tried to get you fired up. i was fired up about the indianapolis colts. anything but our business. >> i was mad. i lost again this morning. anyway, jim, we'll see you in a few minutes. >> thank you. when we come back we'll get the stock of the day. stick around. >> monday on "squawk box," our guest host will be david zaslav and he's bringing a few special guests. susan lucci from "all my children" and investigation discovery. and animal planet chief economist, a bobcat. chief investment strategist, a porcupine. director of u.s. operations, a mini crocodile. don't miss "squawk box" monday. at optionsxpress we're all about options trading.

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back in the day, jcpenney -- well, it is a big loser. 10%. i didn't know it was g t